New Transfer Pricing Rules in Brazil

In the last 2 years, Brazilian legislation has undergone significant changes regarding transfer pricing rules, particularly with the enactment of Laws No. 14,286/2021 and 14,596/2023. Under the new rules, intercompany contracts involving the transfer of technology and licensing of intellectual property rights must be negotiated following the arm's length principle, including in the definition of royalties to be paid. In the previous model, contracts of this nature would be subject to fixed limits on royalties set by law. Now, these limitations are no longer applicable.

To mitigate risks of future inquiries regarding agreed-upon commercial conditions, we recommend that companies review and, if necessary, adjust their intercompany contracts by January 1, 2024, the date on which the new rules will come into effect in Brazil.

Here you will find specific materials on the subject, detailing the main changes and effects of the new legislation.

In the last 2 years, Brazilian legislation has undergone significant changes regarding transfer pricing rules, particularly with the enactment of Laws No. 14,286/2021 and 14,596/2023. Under the new rules, intercompany contracts involving the transfer of technology and licensing of intellectual property rights must be negotiated following the arm's length principle, including in the definition of royalties to be paid. In the previous model, contracts of this nature would be subject to fixed limits on royalties set by law. Now, these limitations are no longer applicable.

To mitigate risks of future inquiries regarding agreed-upon commercial conditions, we recommend that companies review and, if necessary, adjust their intercompany contracts by January 1, 2024, the date on which the new rules will come into effect in Brazil.

Here you will find specific materials on the subject, detailing the main changes and effects of the new legislation.

MAIN CHANGES

a.

Repeal of rules that limited royalty rates (1% to 5%) that may be charged by foreign companies to their affiliates in Brazil.

b.

Adoption of the Arm's Length Principle in negotiating commercial conditions in technology transfer contracts signed between related parties..

c.

Revocation of deductibility limits arising from the payment of royalties for the exploitation of trademarks and patents, technical, scientific, administrative or similar assistance.

WHAT IS THE IMPACT ON YOUR BUSINESS?

Greater freedom in negotiating the commercial conditions of contracts involving the transfer and licensing of intellectual property rights in accordance with the values and conditions already practiced in the market.

Mandatory implementation of the Arm's Length Principle in defining the contractual values to be paid for the rights negotiated between the parties. Possibility of adapting global contractual models to the Brazilian market.

For the foreign party, the possibility of collecting royalties for its intangible assets in amounts consistent with those applied by the international market.

For the domestic party, the possibility of obtaining a tax deductibility benefit greater than 5%.

Greater freedom in negotiating the commercial conditions of contracts involving the transfer and licensing of intellectual property rights in accordance with the values and conditions already practiced in the market.

Mandatory implementation of the Arm's Length Principle in defining the contractual values to be paid for the rights negotiated between the parties. Possibility of adapting global contractual models to the Brazilian market.

For the foreign party, the possibility of collecting royalties for its intangible assets in amounts consistent with those applied by the international market.

For the domestic party, the possibility of obtaining a tax deductibility benefit greater than 5%.

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If you have any questions, speak to our specialized team or contact us directly via e-mail

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